25.06.202613:04:42UTC+00US 10-Year Yield Falls to 7-Week Low

The yield on the 10-year US Treasury note fell below 4.40% on Thursday, its lowest level in seven weeks, as easing inflation concerns reduced the perceived likelihood of multiple Federal Reserve rate hikes this year. The core PCE price index for May came in softer than expected, and the headline measure also rose less than anticipated. These data points tempered pro-inflationary risks, while additional oil supply from the Middle East helped push energy prices lower.

Signs of progress in talks between the US and Iran following a memorandum of understanding that ended a naval blockade contributed to the increase in tanker traffic through the Strait of Hormuz, further supporting the improvement in supply conditions. In response, interest rate futures indicated that traders pared back bets on more than one Fed rate increase this year.

However, underlying inflation indicators remain elevated, and both personal spending and income exceeded expectations. This evidence of solid economic growth and a firm labor market continues to support the prospect of at least one additional Fed rate hike, in line with the more hawkish stance signaled in the latest FOMC projections.